More than Pounds 35 million has been cut from student discretionary awards by county councils in England and Wales in just two years.
The reduction, revealed in a THES survey, means nearly a third less money available for students at a time when the Government wants college recruitment to rise by 25 per cent.
Local authorities have been told by further and higher education minister Tim Boswell not to expect any more cash help for non-statutory provision.
A joint delegation of county and metropolitan councils met Mr Boswell last week and won his endorsement for draft guidelines to encourage greater consistency in awarding discretionary funds.
Mr Boswell has also invited proposals for changing some of the anomalies over which courses qualify for mandatory grants and which do not. But there will be no new money for freshly-designated courses.
One anomaly has led to a collapse in support for law conversion courses. In 1989/90, the largest provider of the Legal Practice Course, the College of Law, received 64 per cent of its fee income from local authorities. By 1994/94 it was 9 per cent.
The National Conference of Drama Schools said the number of local authorities willing to provide full discretionary awards for drama students had fallen from 83 per cent in 1987 to 34 per cent last year.
David Whitbread of the Association of County Councils said funding the teachers' pay award was forcing local authorities to curtail discretionary spending. Grants, post-16 transport subsidies, adult education and the youth service were all being hit.
A spokesman for Lancashire County Council said: "We do not make awards for post-19 students any more. We could not afford to keep paying them. They used to cost us about Pounds 8 million."
Although a recent test case has established that councils must make provision for discretionary grants, a number of authorities are following the example of Warwickshire and Northamptonshire and offering no new awards.